Netflix Gains Most Since July on Customer Satisfaction

Netflix Inc. (NFLX) rose the most in almost three months after a Citigroup Inc. analyst said the video- subscription service has improved its customer satisfaction.

The shares advanced 11 percent to $62.58 at the close in New York, for the biggest daily gain since July 5. The Los Gatos, California-based company’s stock has dropped 9.7 percent this year.

Netflix has grappled with customer-satisfaction issues since increasing prices in 2011 for users who both stream videos and get DVDs by mail and an attempt that year to separate those offerings. A Citigroup survey last month found that 48 percent of customers are “very or extremely satisfied,” compared with about 45 percent in the first and second quarter.

“Netflix’s competitive position continues to rise,” Mark Mahaney, a Citigroup analyst in San Francisco, wrote in an investor note yesterday. “The percentage of respondents listing Netflix as a top destination has increased” from 25 percent in the second quarter to 35 percent now.

“The perceived streaming content selection appears to have improved,” Mahaney wrote. Thirty-seven percent believe that it has gotten better in the past 12 months, while 16 percent say it has worsened, according to his note. Mahaney rates the shares buy/high risk.

The survey included about 3,800 U.S. Internet users, including more than 1,200 current and 700 past Netflix subscribers, Citigroup said.

Netflix shares have been under pressure amid concerns that new competition will hamper its subscriber growth. The company in July raised doubts about whether it can meet its full-year target of adding 7 million U.S. users. Chief Executive Officer Reed Hastings said then that the goal would be “challenging” if growth in third quarter failed to meet internal targets.

The company during the year-end holiday period will probably face competition from Verizon Communications Inc.’s online venture with Coinstar Inc.’s Redbox. Online retailer Amazon.com Inc. also has been rapidly adding content to its Prime streaming service.

To contact the reporter on this story: Niamh Ring in New York at nring@bloomberg.net

To contact the editor responsible for this story: Kevin Miller at kmiller@bloomberg.net

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